Article 313 of the Commercial Companies Law of 1984 (CCL) allows a foreign company to do business in the UAE by opening a branch or a representative office there. In general, unlike foreign subsidiaries, branches or representative offices are basically mere emanations of the parent company. Therefore, the entity thus formed will not have a separate legal personality from that of the parent company which will control the generated business completely and will be responsible for all obligations undertaken by it.
One of the main conditions for the establishment of a branch or representative office in the so-called Mainland is the appointment of a Service Agent, a person or entity based in the UAE. If instead, one chooses to proceed with the registration in the Free Zones, one should take the special rules of the chosen free zone as a reference point. However, it should be noted that some industry regulations allow the registration of branches, but not the registration of representative offices.
In general, the opening of a representative office or branch on the Mainland, requires the approval of the UAE Ministry of Economy and Trade and its registration in the commercial register of foreign companies kept at the Ministry. In order to obtain the necessary approvals, it is essential to submit the following documentation: company by-laws, updated company certificate, minutes of the meeting resolving the opening and appointing the manager, notarized power of attorney for the appointment of the manager, as well as possible additional documents required by the authorities according to the specific activities of the company.
Finally, from the fiscal point of view, since the permanent establishment is not a legal entity distinct from the parent company, tax deductions at source on (net) profits generally do not apply, they are instead attributed to the parent company. Note also that in some cases their application can be reduced or eliminated under specific contractual clauses.
(Bologna Office – Linda Tontodonati – 0039(0)51 2750020)
